Why Do Expert Business Brokers Use Market Analyses to Sell Your Business?
A business broker’s job is to help buyers and sellers of private businesses complete sales transactions. To do so successfully requires expertise and deep knowledge of the market the business is most connected with. That’s why a qualified broker will conduct market analysis when you’re preparing to sell your business.
Market analysis is the process of looking closely at a specific market within the general industry. A business broker examines all the dynamics, competition, size, and trends that impact the market your business is in. That gives the broker a better idea of how to market your business in a competitive landscape.
What Is Market Analysis?
Market analysis is a detailed look into industry trends, customer behavior, and economic profiles of the market your business is most closely aligned with. It can include the identification and measurement of key market components like:
Market size
Growth patterns
New developments
Customer demographics
Competitive landscape
Market regulations and standards
External opportunities and challenges
Market analysis helps business brokers make informed decisions about how to sell your business. They arrive at realistic evaluations and can adjust their marketing strategy to attract real suitors while maximizing your returns.
Primary Factors of Market Analysis
Some of the key factors business brokers observe in market analysis include the following.
Industry Trends
A business broker looks into the general shape and direction of the industry that best defines your business. They evaluate the opportunities for growth and expansion, as well as the challenges the market may face.
Comparable Businesses
Business brokers look closely at the competition to get a sense of pricing conventions and business patterns at a local level. They use comparisons to evaluate your business’s position in the marketplace.
Customer Demographics
Business brokers pay special attention to customer behavior and preferences. They try to understand the motivations that make customers buy your products or services, as well as what types of customers your business attracts most.
How Market Analysis Affects Your Business Sale
With proper market analyses in hand, a business broker uses their insights to put you in the best position for selling your business.
A business broker uses the data they get from market analysis to arrive at a reasonable price for sale, steering clear of over- or under-valuation. They also use the data to devise a marketing strategy that will attract the most interest from prospective buyers.
Market analysis also helps brokers at the negotiating table. It gives them measurable data that supports your business’s valuation. With a well-researched, thorough market analysis, a business seller has a clear advantage in their corner.
A Business Broker’s Due Diligence
Market analysis is a core function that every business broker must undertake. When it’s time to sell your business, a broker will make every effort to know the market that responds most to your product or service.
When it comes to business transactions, there’s no such thing as “too much information.” It’s a business broker’s job to learn all they can about your business and its general environment to get you the best return from selling it.
The Business Sale Process Explained by a Business Broker
As a business owner, you may be just like many others who operate small and medium businesses — you will sell just one business during your lifetime, and because that is your first and only sale, you may not know what to expect from the sale process.
Selling your business is complex. Using a business broker to sell your business can help you avoid many potential pitfalls.
A business broker is a professional intermediary between you and a buyer. They handle most of the steps necessary to sell your business. However, to sell your business, you must be intimately involved.
Selling your business is a significant decision that you get the last word on, so understanding the business sale process can help prepare you for those decision points.
An Overview of the Business Sale Process
The business sale process has five stages that encompass several steps. The five stages are:
Retaining a business broker
Valuing and profiling your business
Marketing your business and finding buyers
Negotiating and conducting due diligence
Closing
The process starts with you deciding whether you want to sell your business. Consider researching several business brokers to interview before you know if you’re ready to sell. Selling your business can take 6 to 12 months. You have to feel comfortable about the broker you choose to work with.
The Process to Sell Your Business
You might choose not to work with a business broker. However, if you do work with one, here is what you can expect from the process.
Retain a Broker
Meet with your business broker to discuss every aspect of your business, ask questions, determine whether selling your business is what you want to do, and get on the same page.
Beyond a candid discussion about your business, this stage includes an analysis of your business, industry, and competitors and provides a detailed valuation of your business. If you agree, you can sign a marketing agreement to move forward.
Value and Profile Your Business
To attract buyers, a blind business profile is developed. This one- to two-page document provides enough information to market your business to potential buyers without disclosing your identity. A more substantial overview of your business is also developed to provide to qualified potential buyers.
Market Your Business and Find Buyers
In this stage, a business broker begins marketing your business to bring in qualified buyers. The goal is to sell your business quickly at terms that meet your goals. Potential buyers are screened, financial statements are verified, and buyers are interviewed to determine who might be a good fit to run your business successfully.
Negotiate and Conduct Due Diligence
Your business broker receives offers and negotiates to create a win-win. You are presented with an asset purchase agreement instead of a letter of intent. This helps you fully understand the terms, conditions, and contingencies. Your broker manages the due diligence process with the buyer’s attorneys, accountants, and financial and business advisors.
Closing
This is the final stage of selling your business. The business broker will manage every detail of the closing for you, keeping attorneys and accountants on both sides in sync. Both parties sign all documents, and the buyer transfers money to you.
Your business broker will keep you informed at every step of every stage, and you approve all marketing materials, documents, and agreements throughout the process.
Have Confidence in Selling Your Business
Knowing what to expect from the business sale process can give you confidence and result in the best outcome when you decide to sell your business.